WASHINGTON (AFP) – Faced with bitter opposition, former U.S. treasury secretary Larry Summers abruptly withdrew from the race to lead the Federal Reserve, potentially opening the door for the bank’s first woman chair.
Sunday’s surprise announcement came after weeks of speculation and no little ire over his bid to succeed Ben Bernanke, but his candidacy was ultimately felled by a lack of support from key senators.
President Barack Obama confirmed he had accepted Summers’s decision during a telephone call, in a move that boosts the chances of Janet Yellen, the current deputy chair of the Fed, taking over at the US central bank.
Summers’s run for the pivotal economic post had received backing from the White House, but in other quarters his efforts were undermined by fierce criticism of his record as head of the Treasury during Bill Clinton’s presidency.
His opposition to the regulation of derivatives — the often complex financial products blamed in part for triggering the 2008 global economic crisis — and his work on Wall Street had attracted particularly heated scrutiny.
In stepping aside, Summers issued a letter stating that his withdrawal came at “a complex moment in our national life,” noting he had “reluctantly concluded” that his route to securing the job was not tenable.
“Any possible confirmation process for me would be acrimonious and would not serve the interests of the Federal Reserve, the administration, or ultimately, the interests of the nation’s ongoing economic recovery,” Summers said.
The 58-year-old economist, a Harvard professor and former president of the university, worked for Clinton at the Treasury Department between 1999 and 2001, and served as Obama’s chief economic adviser at the White House in 2009 and 2010.
The latter role raised his prospects of taking over at the Fed, with several reports talking him up as Obama’s preferred pick.
In a statement following Summers’s decision to withdraw, Obama praised his former aide’s performance in government during the financial meltdown at the turn of the decade.
“Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today,” Obama said.
That opinion, however, was not shared by several members of Obama’s Democratic Party who sit on the Senate’s influential Banking Committee.
Last week, they said they would oppose sending Summers’s Fed nomination to the full Senate for a confirmation vote, effectively blocking Obama’s favored candidate at a sensitive time in a still bumpy economic recovery.
Despite his stellar credentials, Summers’s work for a New York-based hedge fund and for Wall Street banks, which he would have been tasked with regulating had he been made Fed chairman, had come under fire.
Like many senior economic advisers in U.S. political life, Summers has racked up millions of dollars in speaking and consulting fees from financial firms, feeding accusations that he would have been soft on Wall Street.
Earlier Sunday, Citigroup, one of several top U.S. financial institutions that received billions of dollars in a bailout from the Obama administration, said Summers had stopped working for them as a consultant.
With a reputation as a strong economist, Summers also struck many as overly brash, a man of sharp elbows in Washington’s corridors of power, with several key lawmakers arguing that a more conciliatory chair was needed to take over when Bernanke leaves his position, likely in January.
Yellen, 67, seen as highly experienced, now steps up as frontrunner to take over at the Fed. Although the White House recently said several other candidates were on a shortlist, the deputy chair is seen as a consensus candidate and there has been no indication that her confirmation hearings would hit trouble.
Summers’s decision to bow out was welcomed by the Progressive Change Campaign Committee, a Washington-based political and consumer pressure group.
“He would have been an awful Fed Chair,” said Adam Green, the group’s co-founder.
“President Obama should appoint someone to lead the Fed who has not accepted millions in payments from Wall Street, and who will prioritize an economy that works for the little guy above further enrichment for the big guy.”
Copyright 2013 The National Memo